Insurance companies eager to retain their existing customers and also attract new ones in the midst of growing economic challenges are offering staggered premium options across different risk classes.
The idea is to ensure that their customers that do not have enough money to purchase annual policies are able to get the same cover on staggered payment of premium.
Nigeria, Africa’s most populous nation, has been grappling with high inflation and rising food prices for a while, and worsened further by the COVID-19 pandemic, #EndSARS protest and growing insecurity in different parts of the country.
According to the Consumer Price Index released recently by the National Bureau of Statistics (NBS), on a month-on-month basis, the headline index increased by 1.56 percent in March 2021, this is 0.02 percentage points higher than the rate recorded in February 2021 (1.54%).
Food inflation, also a closely watched index, spiked to 22.95 percent from 21.79 percent recorded in the previous month.
On a month-on-month basis, the food sub-index increased by 1.9 percent in March 2021, up by 0.01 percent points from 1.89 percent recorded in February 2021.
All of these put together are reducing the disposal income in the hands of an average Nigerian, making citizens to focus on basic needs, with services like insurance getting less attention.
Adedoyin Salami, chairman, Prestige Assurance plc, who confirmed the attractiveness in staggered payment by insurance consumers during its company’s annual general meeting in Lagos, said Prestige Assurance had noticed since 2020 that direct clients and brokers were opting for shorter premium payments.
Though he said this could have been as result of uncertainties in the ongoing recapitalisation in the industry, he stated that the downturn in the economy was largely responsible.
“In view of the uncertainties hovering around the recapitalisation exercise and the downturn in economic activities due to the pandemic, most brokers and direct clients have begun to place their businesses quarterly and in some instances, on weekly basis in 2020,” Salami said.
This same trend has continued in the first quarter of 2021, Salami said.
Meanwhile, across the insurance market, underwriters are wooing customers, particularly direct clients to pay in instalments as it is convenient for them, and many consumers are embracing this package, particularly in motor insurance policy.
Industry analysts say the challenge is on the insurance companies to increase their communication and engagement strategy, so that clients do not unknowingly go off cover and only to realise it after a risk has crystallised.
Ikechukwu, a client to one of the general insurance companies, had taken a comprehensive motor policy for his Honda Pilot SUV for a half-year period and hoped to pay renewal premium when the half-year period elapses.
According to the consumer, this arrangement had run successfully for a while, and when the half-year period expires, he expects his insurer to communicate through text message or email that the policy payment or renewal is due.
“Unfortunately, I was not told that the premium I paid for the half year had expired and that I was no longer covered, but only for me to hear after my car got involved in an accident with a trailer that I was not under cover,” the customer lamented.
This was the plight of an insured that was running an instalment payment of premium, but did not realise he had gone out of cover when the payment period elapsed, and was not communicated.
While this offer is attractive and could make more people embrace insurance despite the difficulty in the economy, adequate communication and engagement with customers are critical in sustaining relationships and building confidence among consumers.
Within a period of five years – between 2014 and 2018, insurance companies paid out N648.16 billion in claims, made up of N315.47 billion in life business and N332.69 billion in non-life business, according to figures obtained from the Nigerian Insurers Association (NIA).
The breakdown of the claims shows that life operators paid N35.95 billion in 2014; N50.57 billion in 2015; N61.87 billion in 2016; N72.30 in 2017; N94.78 billion in 2018; while non-life operators paid N51.06 billion in 2014; N54.65 billion in 2015; N57.76 billion in 2016; N70.52 billion in 2017 and N98.70 billion in 2018.
Meanwhile, out of N490 billion generated in 2019, the industry paid out N210 billion, underscoring its commitment to meeting clients’ expectations. Though there is still room for improvement, a lot has changed in terms of claims payment to the benefit of the consumers.
